Capsim Case Study
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Capsim Case Study
Optimizing Limited Resources to Meet Demand
The first step towards optimization of limited resources to meet the growing customer demand is to employ a cost-leadership strategy. Cost leadership strategies seek to gain a competitive edge over rivals by minimizing production costs through effective resource utilization to a level below the costs of rivals. In doing so the company is able to sell its products at low prices and still maximize profit (Griffin, 2013).
The task of optimizing resources to meet growing demands can also be attained by developing operational excellence. Improving operational efficiency makes it possible to execute tasks in a more effective and resource-sensitive way. This can be done through de-layering of the organization, and increasing management spans of control (Hobbs, 2011).
Other strategies include deriving benefits form strategic sourcing and using technology to support business processes. Process excellence seeks to optimize the production processes to attain greater efficiency and effectiveness through the utilization of strategies such as lean and six sigma models. Spans and layers increase direct reporting and minimize management layers in order to reduce management overhead and flatten the organization.
Further, the effective supply chain models enhance the efficiency of the company’s direct and indirect material spending (Hobbs, 2011). Using digital technology helps to evaluate the current processes, consumer channels, and partner interactions for opportunities to utilize technology in order to automate manual work and replace manual interactions with digital ones.
Maximum resource utilization requires efficient production processes. For instance, the processes should be balanced to ensure that all tasks are completed in a timely and speedy fashion (Hobbs, 2011).
There is also the need to physically locate machines and processes adjacent to each other in order to encourage efficient flow of products from one labor machine or employee to another with minimal motion so time is not wasted by moving products from one process to the next. The physical linking of resources is an important feature of producing products and the result can be superior organizational performance (Hobbs, 2011).
By optimizing resources that have been balanced, even different processes can generate products at the same rate. Special-order products can also be manufactured in the customer-quoted lead time even with extra value-added time needed for completing any specialized work content. Furthermore, timely marketing is important. Therefore, production prototypes should be placed in the hands of customers at the earliest possible timeframe (Hobbs, 2011). The formal feedback loop practices can also be embraced to gather information from the field.
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Why Hiring More Employees is not Advisable
The company should recognize that increasing the number of employees in order to maximize production capacity is not a wise decision. Hiring additional labor normally results in higher costs for the HR department and for training and mentoring (Collier & Evans, 2007). This is particularly true for the motor vehicle manufacturing industry in which suspending the workforce levels is never a feasible alternative. Increasing employees also means an increase in labor costs and wage and salary costs (Collier & Evans, 2007).
However, there are other less obvious disadvantages of increasing the number of employees. For instance, the organization is bound to take time and effort to acculturate new employees into the company.
There will also be administrative and personnel management challenges and complexities that come with a high number of employees (Collier & Evans, 2007). Another issue that the company should take into consideration is the fact that hiring more employees might result in a situation in which the organization becomes subject to additional government regulations.
For instance, once a business hits a threshold of 25 percent employees, it might become subject to Title VII of the Civil Rights Act, which places legal constraints on the employment practices of the business, and requires more paperwork to meet the federal reporting standards (Collier & Evans, 2007). In the end, inefficiencies might increase, resulting in poor performance and low productivity.
Why Forced Overtime should not be Utilized
While forced overtime is commonly utilized as a tool to maximize productivity in order to meet the growing market demand for products, it can be counterproductive to this goal. Top on the list of the company’s mission is to ensure that there is prudent utilization of financial resources through significant reductions in costs. In normal situations, employees who participate in overtime programs are often paid a higher hourly rate versus their normal rate of pay for regular hours worked. This cuts into all the additional profits that the company has been receiving from increments in product and service outputs.
Mandatory overtime also results in employee burnout. This is particularly true when it does not come out of their willingness and desire to assist. When workers do not have a choice on how many hours they work, they can feel demoralized and dissatisfied with the organization. This might increase the organization’s turnover rate, thereby crippling the company’s overall goal of meeting the constantly rising demand for its products.
In addition, it might result in the loss of its most highly talented, skilled, and experienced workers, thereby increasing costs of regular recruitments and the training of new talents. Further, the organization’s employees will be physically and mentally fatigued during ordinary hours, thus reducing their productivity. Capsim Case Study
Increased Investment in Automation
Although Tesla’s goal is to boost production from 50,000 to 500,000 cars yearly, the organization has not invested heavily in automation. Today, Tesla has a robotics system that has the capacity to produce 50,000 cars. Therefore, the company should explore the significance of automation systems as a way to speed up production and maximize profits (Hirano, 2016). Indeed, automation can be an important tool in reducing employee burnout, increasing output, and reducing operational costs and time.
Automated systems also support just-in-time (JIT) manufacturing, which is a management model that is employed in manufacturing that entails having the right items of the right quality and quantity in the right place and at the right time. The effective utilization of automated systems supports JIT manufacturing, resulting in improved quality, productivity, and efficiency.
JIT manufacturing can be described as comprising of three major elements: people, plants, and automated systems, which must be incorporated into an organization’s culture in order to offer a structure for focused improvement (Hirano, 2016). Most importantly, automation can be used by the organization to guarantee mass production and improves service delivery to customers.
Need for Additional Production Equipment
The company requires additional production equipment in order for it to increase output and the number of products that it distributes to customers every year. Technological equipment can guarantee its goal of generating products at a rate of ten times its current pace. Additional equipment is required by the organization as tools to increase mass production. The equipment needed is machinery that can make the creation and development of tangible physical products possible for the business. Capsim Case Study
This might require investments in technologies, and engaging in innovative research and development initiatives. The equipment should be developed with state of the art technological concepts that have more elaborate operations that make use of machinery and assembly lines. The task of selecting a production scale model within an organization’s capital implies that it is important to have this equipment.
Although the purchase and development of highly efficient equipment can prove to be expensive in the short-term, it will generate the economies of scale that the company desires through mass production.
Ensuring Adequate Capacity
Adequate capacity can be attained through aggregate production planning. This is particularly important in the medium-term when the focus in capacity planning moves to the balancing of the available capacity with demand. During this period, the organization has opportunities for limited capacity augmentation through increment use of existing capacity through overtime and the introduction of an additional shift. Capsim Case Study
In addition, by contracting part of the work to external vendors, the capacity inadequacies can be dealt with on a temporary basis (Mahadevan, 2015). It is also tenable for the company to modify the demand by shifting it from a peak period to a nonpeak period. Various strategies are often present for capacity planning with the use of these options. In particular, these methods are referred to as aggregate production planning, and can be used to realize adequate capacity. Capacity planning in the short-term is often somewhat different.
During this period, the available capacity is often fixed (Mahadevan, 2015). As a result, the capacity program is restricted to making effective utilization of available capacity and ensuring that unforeseen developments such as equipment breakdowns and poor planning methods do not result in keeping the capacity idle.
There are various strategies that the organization can employ to ensure sufficient capacity in production. For instance, the location of its facilities should be one of the major factors that Tesla should take into account when considering adequate capacity. The task of putting up production facilities with adequate capacity entails initial investment.
In particular, the company should take a strategically right option that needs to be weighed against all available options. These decisions should be sued to inform the future decisions on probable capacity expansions plans (Mahadevan, 2015). For instance, the company should consider issues such as the availability of raw materials and access to the marking important decisions.
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Capsim Case Study
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